Will Twitter be better or worse with Elon Musk? wall street debate

While Elon Musk has struck a $44 billion deal for Twitter, Wall Street insiders have shared their thoughts on what the planned sale says about the social media giant, what impact it will have on the wider ad space, and whether it will be. silver for Tesla. The boss. It goes well with the signature.

“Twitter: go to the bank,” said Michael Nathanson, an analyst at MoffettNathanson, who has a “neutral” assessment of the stock. His main idea: “We didn’t think there was another bidder out there and that Elon Musk’s bid was stealing a shareholder deal, given the company’s operational, monetization and valuation challenges. Selling Twitter for $54.20 is definitive proof that the Twitter idea was far more valuable than the actual long-term operations of Twitter!”

Twitter co-founder Jack Dorsey also wrote about Twitter as an idea and opportunity after the deal was announced on Monday, saying, “The idea and the service are important to me and I will do my best to protect both. ”.

Meanwhile, Evercore ISI analyst Mark Mahani addressed the top questions investors are likely to have, including whether Twitter will become a “better” platform for skin ownership. “It’s hard to say,” insisted the Wall Street expert. “We firmly and consistently believe that product innovation on behalf of consumers and advertisers has been weak on Twitter for many years. The Twitter address acknowledged this. So the simple conclusion is that Twitter disguised as Twitter is unlikely to deteriorate in terms of product innovation. It is unclear whether it will improve or not. ”

Mahani also looked for a potential advertiser. “There is a distinct possibility that marketers will move their ad campaigns to other platforms (Google, Facebook, Snap, TikTok, Reddit, etc.),” ​​Musk said, he argued.

“As far as users are concerned, our extensive research over the past seven years simply hasn’t shown much interest in Twitter’s content moderation policy, which has given much attention to Muskie,” Mahani said. “We are skeptical that more moderation will lead to a significant increase in consumption growth. And interest in subscription offers has always been limited in our surveys, with only 13% of respondents in our most recent survey expressing interest. That said, Musk’s ideas for allowing tweets to be edited and removing restrictions on text characters are very solid and convenient.

Did Twitter’s board make the “correct shareholder decision” to sell the skin? “It depends on two things,” Mahan argued. “How confident is one person that Twitter’s board of directors and management will be able to meet its publicly announced goals for 2023 ($7.5 billion in revenue and 315 million daily active users, DAUs). And when will the booming stock market return. “Ultimately, Musk’s offer took a significant premium in the tech bear market as Twitter’s stock dropped 50% from late 21 numbers,” said Evercore’s ISI expert.

Ahead of Twitter’s latest financial update on Thursday, analyst Nathanson also shared his thoughts on the business results of the deal with Musk and the results achieved. “Interestingly, the board received the deal just three days before Twitter announced its Q1 2022 revenue,” he wrote. “Snap’s quarterly earnings last week showed that brand advertising is worse than performance advertising amid macroeconomic pressures such as rising inflation, supply chain shortages and the war in Ukraine. We think Snap’s relative weakness in branded advertising (which we estimate represents about a quarter of Snap’s advertising revenue) was a negative issue on Twitter, which is more exposed to brand spend among the major ad platforms. digital (the brand had 85. Twitter. It’s the percentage of ad revenue in 2021).”

What does all this mean for the future of branding and other advertising across social and digital channels? “We hope advertisers will be less willing to spend on Twitter if Elon Musk removes content moderation to promote free speech,” Nathanson wrote. But he also stressed: “We still believe that performance-based advertising is a key driver of digital (and raw) ad spend in the US, and we don’t expect Elon Musk’s acquisition of Twitter to significantly change that trajectory.”

Cowen John Blacklage also discussed the role advertising trends may play in the social media giant’s decision to accept Musk’s offer. “While the offer is a significant 38% bonus in early April, it is near the middle of Twitter’s 52-week trading range and 26% below the last annual high,” he said. “Macro and market conditions have deteriorated in recent months. With the potential impact of the Ukraine conflict on Twitter’s brand advertising, the Board may feel that a similar or higher assessment would be difficult to achieve. Offer short and medium term offers. In addition, due to the various macro headwinds (rising interest rates, rising inflation, supply chain issues, etc.), the board may also consider a possible US recession on the horizon, which will affect the brand’s publicity in the future. Twitter and stock price levels.

Blacklage also noted that the social media company felt the need to refocus its advertising business: it aims to increase DR advertising to 50% of total ad revenue, up from the current 15%, which is behind its social peers.